Gas transportation issues concentrating the minds of Israel, Turkey and South Cyprus

Gas transportation issues concentrating the minds of Israel, Turkey and South Cyprus

The main driver for Israel to reach rapprochement with Turkey is Israel’s need for a viable route to market its gas to Europe, writes Murat Yetkin, a regular columnist for Turkish daily Hurriyet.

He writes that Israel has more motivation to repair ties with Turkey on 26th June than does Turkey. However, gas from Israel will provide an alternative source to Russia, in the middle term, apart from the political significance of economic interdependence.

An anonymous Israeli source told Hurriyet that the total reservoir of the Leviathan and Tamar gas fields was estimated to be around 900 billion cubic meters (bcm), some 150 bcm of which is planned for exports. “That could bring in important revenue for the Israeli economy,” the source said. “But because we have not been able to find ways to reach the markets, companies have not yet been able to invest enough to develop the fields further.”

Noble and Delek are the major contractors for exploration, drilling and production of gas from both fields. The Israeli authorities have found that selling the gas through a pipeline to be constructed to Turkey would be the most feasible way to do this.

An EU study on conveying the gas to Cyprus, then onto either the island of Crete or mainland Greece, undertaken since the Greek Cypriot government wants to export gas from its own fields, shows that building Liquefied Natural Gas (LNG) plants to convey gas by sea, would not be profitable.

It would require a pipeline running over 1,100 km through the Mediterranean Sea, in some places at depths of 3,000 metre. However, a pipeline from Israeli gas fields to Turkey’s oil and gas terminal at Ceyhan would mean a pipeline of just 485 km through the relatively shallow waters of the East Mediterranean.

In this case, the Israeli-Turkish gas pipeline will have to pass through the economic maritime zone of the Turkish Cypriot government. “This may upset our Greek Cypriot friends, but this is an important economic project for us and we have to be rational. This is the shortest route,” Hurriyet’s Israeli source said.

An opinion piece written in Cyprus Mail says that this could be a wakeup call for Cyprus:

“With Turkey and Israel now back on track, both sides are said to be keen to move forward quickly with their energy plans. The most feasible way for Israel to pipe gas to Turkey, and ultimately on to Europe, is through Cyprus’ EEZ.

However, the Cyprus government will never agree to this without a solution to the island’s division. Many in the international community are banking on a settlement this year, which would resolve the gas issue nicely as well. But a 2016 solution is nowhere near being a certainty.

Logically an observer could assume that Turkey, in order to push its gas plans forward, would show some goodwill in helping achieve a solution quickly. This would be the ideal scenario for everyone involved.

But according to one industry expert, both Ankara and Tel Aviv could bypass Cyprus altogether either through Compressed Natural Gas transported by tanker, or invoking an international charter that establishes a multilateral framework for cross-border cooperation in the energy industry. Cyprus and Turkey are both signatories to the agreement, which does not consider an EEZ as sovereign territory but purely an economic zone.

Taking this route would involve Israel seriously damaging its relations with Cyprus, though assurances have been given to the government by Tel Aviv that the Cyprus-Israel relationship won’t change.

Despite a lot of talk by Nicosia and numerous tripartite meeting with Greece and Israel, a proposed pipeline taking the gas through Cyprus and Greece, remains commercially unrealistic, which means the only financially viable option is through Turkey.”

Yetkin writing in Hurriyet points out another option being considered by Israel. Depending on the outcome of the Cyprus negotiations, a pumping station in Kyrenia could be constructed which would collect Cypriot and Israeli gas and convey it by a 100km pipeline to Mersin. In turn, Ceyhan’s gas terminal lies another 120 km from Mersin.

Such an arrangement would depend on good will between the authorities on both sides of Cyprus. Should reunification be achieved, both communities could benefit from hydrocarbons.

He goes on to say that the US has been pressing hard for reunification and for rapprochement between Turkey and Israel – its two main allies in the eastern Mediterranean.

If Turkey and the EU can diversifying their sources of gas this would mean buying less gas from Russia. On the other hand, if the Turco-Russian normalisation process develops, the Russians could reactivate the new South Stream project to sell gas to EU markets via another pipeline through Turkey and the Turkish economic zone in the Black Sea, in order to meet the increasing demand in Europe.